Africa's contribution to reviving the world economy (part 3): The significance of Africa

Jon Aldous 기자 승인 2023.11.21 16:28 의견 0
World Bank

By harnessing its economic potential, Africa can not only meet its developmental challenges but also make a substantial contribution to global economic growth, fostering a brighter and more stable economic future for its people and the world at large. The continent's pivotal role in counteracting the global economic slowdown hinges on its youthful population, abundant natural resources, and strategic geographic position.

Regarding population, consumer markets, and labor forces: While aging is a common trend across various regions, Africa's population aged sixty-five and above has consistently represented only about 3 percent over the last forty years. With nearly two-thirds of its population under thirty and 40 percent below fourteen years of age, Africa boasts the youngest demographic profile globally. This demographic advantage positions Africa to benefit from a burgeoning young consumer market and a robust supply of youthful labor for the next three to four decades. Nigeria, projected to be the third-most populous country by 2050, trailing only India and China, exemplifies this trend.

Africa's population is anticipated to double by 2050, reaching 2.8 billion from the current 1.4 billion. This surge will primarily drive global demand in various sectors, including consumer goods, education, health, technology, and infrastructure. For instance, population growth will necessitate a 50 percent increase in housing demand, encompassing everything from basic utilities and appliances to municipal services. With an existing housing shortfall of 51 million units as of 2018 and an expected rise to 75 million by 2050, the demand for housing and related consumer goods and services in Africa is vast and continually expanding. The housing sector is also recognized for its significant job-creation capacity.

World Bank

The International Finance Corporation (IFC) estimates that each new housing unit in Africa generates five full-time jobs. Consequently, addressing the housing shortfall by 2050 could lead to the creation of 375 million jobs across the continent. This job surge has the potential to significantly reduce informal-sector employment, which presently accounts for 83 percent of African employment, and also tackle unemployment, boosting the number of employed African adults aged fifteen and above by over 80 percent. This increase in employment and household income will stimulate aggregate demand in the region, creating a virtuous cycle of rising incomes, higher demand, and increased imports, which will, in turn, elevate global demand for consumer and technological products and services. In essence, addressing Africa's housing deficit could significantly contribute to global economic growth over the next thirty years while simultaneously providing housing and employment opportunities for its expanding youthful population.

Considering that Africa's youth labor force participation rate (LFPR) is about 38 percent, the continent needs to generate approximately ten million jobs annually for the next two to three decades to employ each new young entrant into the workforce. The jobs created by addressing the housing shortage will more than meet this rising demand. If supportive policies increase Africa's youth LFPR to the level seen in North America (51 percent), the demand for new jobs would escalate to 13–14 million per year, a target achievable through the housing sector alone. Furthermore, enhancing the LFPR of the youth on the world's youngest continent and creating employment opportunities for them will boost the global LFPR, enhancing global workforce productivity and the employment-to-population ratio. As previously mentioned, such initiatives are poised to contribute significantly to global economic growth.

The logic and statistics used for the housing sector can similarly be applied to the burgeoning demand in Africa for energy, infrastructure, education, entertainment, and healthcare services in the coming decades. Essentially, as Africa's middle class expands and disposable incomes rise, African consumers are set to significantly boost demand for both basic infrastructure and a range of goods and services, both locally and globally. This increase in consumption, which typically accounts for around 60 percent of global GDP, could play a critical role in the worldwide economic recovery.

Regarding natural resources, Africa is richly endowed with a vast array of natural wealth. The continent holds nearly 30 percent of the planet's mineral reserves, 12 percent of its oil, and 8 percent of its natural gas. It is also the repository of 40 percent of the global gold reserves, as well as the world’s largest deposits of cobalt, diamonds, uranium, and platinum. In fact, Africa contains 30 percent of the world's rare-earth elements, crucial for high-tech industries like semiconductors, batteries, and green energy. Additionally, with 65 percent of the world's arable land, Africa plays a key role in future global food security and production.

Africa’s potential in the global energy transition for several reasons. First, the continent, particularly Northern Africa, has abundant renewable energy resources. Utilizing these resources, Africa can greatly contribute to the global new sources of energy supply and help reduce dependence on fossil fuels. For instance, installing concentrated solar power plants on just 1 percent of the Sahara Desert could fulfill the electricity needs of Europe, the Middle East, and Africa. The Sahara's intense solar radiation also makes it an ideal site for producing green hydrogen, which could be transported to Europe through existing pipelines. Thus, Africa could become a major exporter of new sources of energy.

Second, Africa's rich mineral reserves, including crucial battery components like lithium, cobalt, and nickel, are vital for electric vehicles (EVs) and energy storage systems. Africa could become an important player in the EV and new sources of energy storage markets through responsible mining and processing of these minerals.

Third, with Africa's population set to double by 2050, meeting this increasing energy demand with new sources is key to addressing global energy shortage and prices increase. Presently, only 56 percent of Africans have access to electricity, meaning about 600 million Africans are without access. This presents a unique opportunity for Africa to bypass traditional energy infrastructure in favor of new sources, similar to how it skipped landline technology in favor of mobile communications. New sources of electricity generation, along with off-grid and mini-grid solutions, could be the future for expanding electricity access to its fast-growing population. The same approach can be applied to the transportation sector, with a shift towards EVs. As Africa aims to balance growth with environmental responsibility, its efforts in new sources and forms of energy, already underway in countries like Ivory Coast, Senegal, Uganda, Togo, Cameroon, and several South African cities, are being closely watched and appreciated by the global community.

World Bank

Countries across Africa are actively participating in these environmental efforts. Burkina Faso, for example, hosts the largest solar power facility in West Africa. Senegal, Ethiopia, generates nearly all of its electricity from renewable sources, with 96 percent coming from hydropower.

In essence, Africa can significantly contribute to global new sources of energy and battery / energy storage technology development by capitalizing on its energy resources, fostering local manufacturing and innovation, and engaging in international collaborations. This would significantly support the global economic development goals, improve energy access.

Regarding trade and connectivity, Africa's geographical positioning, surrounded by seas and oceans, presents a strategic advantage in trade. Out of the continent's fifty-four countries, thirty-eight have coastlines, while the landlocked nations can access open waters through neighboring countries. Africa's location as a bridge between the Atlantic and Indian Oceans makes it a crucial hub, facilitating trade routes to Europe, the Americas, Asia, and the Middle East.

Africa's coastal regions, including the Gulf of Guinea, the Red Sea, and the Cape of Good Hope, are vital maritime trade routes. These routes play a significant role in global shipping and commerce. Additionally, Africa's proximity to the Suez Canal, through which 12 percent of the world's trade passes, offers a strategic advantage. This canal, connecting the Mediterranean Sea to the Red Sea, is a key maritime shortcut, reducing shipping distances and costs for goods transiting between Europe, Asia, and Africa.

Furthermore, Africa's abundant natural resources, coupled with its strategic location, facilitate the export of these resources worldwide, spurring economic activity and trade partnerships.

Efforts to enhance and expand trade corridors within Africa are ongoing. Projects like the Trans-Saharan Highway, Trans-African Railway, African Integrated High-Speed Railway Network, and the Niger-Benin crude pipeline aim to boost intra-African trade and connectivity, promote regional integration, and enhance Africa's role in global trade. Policy-wise, initiatives like the African Continental Free Trade Area (AfCFTA) are exploring regional integration, aiming to establish a unified market across the continent. This could increase intra-African trade, attract investments, and create a more conducive business environment, thereby positioning Africa as a significant player in the global trade arena.

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